On Appeal from the United States District Court for the Eastern District of Pennsylvania, D.C. Civil Action No. 81-2873.

Higginbotham, Hutchinson and Scirica, Circuit Judges.

Author: Higginbotham

Opinion OF THE COURT

A. LEON HIGGINBOTHAM, JR., Circuit Judge.

Defendants FinanceAmerica Credit Corporation ("FACC") and Melvin Rubin, Esq. ("Rubin"), appeal from the district court's order granting the motion of plaintiffs Bertram Saber ("Saber") and B & E Productions, Inc. ("B&E"), to enforce a settlement agreement. The order deals with only one of plaintiffs' two claims. The district court's order dismissed with prejudice Saber's personal injury claim against FACC and Rubin, and it ordered defendants to pay $35,000 plus interest, costs and attorney's fees to the plaintiffs within twenty-one days of the date on which the order was entered. On appeal, FACC and Rubin assert: (i) that the settlement order is invalid, principally because they did not authorize their lawyer, who was retained by FACC's insurance carrier, to enter into a partial settlement; and (ii) that the award of attorney fees is inappropriate, regardless of the validity of the settlement. Saber and B&E assert that the district court's order is interlocutory and unappealable. Because we conclude that we are without appellate jurisdiction over the district court's order, we will dismiss the appeal.

I. BACKGROUND

A. Underlying Facts

On February 17, 1979, two United States marshals, acting under a writ of execution issued by the United States District Court for the District of New Jersey, seized $54,366 in admission ticket proceeds from the box office of the Atlantic City Convention Hall. FACC had obtained the writ based on a judgment against its debtor, Kruse Classic Auction Co., Inc. ("Kruse"). Kruse was conducting an automobile auction in the Convention Hall. B&E had leased the hall to put on an annual auto show, in which Kruse was one of the participants. B&E sold the admission tickets. On February 22, 1979, B&E filed a federal diversity action against FACC, seeking the return of the seized funds as well as compensatory and punitive damages in excess of $50,000. B&E's complaint alleged that it had merely sublet a portion of the hall to Kruse, and that Kruse had no interest in or right to the admission ticket proceeds.

Saber, the manager of B&E, subsequently joined this action as a plaintiff, asserting a personal injury claim against FACC and its attorney, Rubin, who was added as a defendant. Saber's personal injury claim against Rubin stems from events surrounding the marshals' seizure of the funds at the Convention Hall box office. Although Rubin was also named as a defendant for purposes of B&E's seized funds claim, the basis for his alleged liability on that claim is not explained on the record. With the joinder of Saber and Rubin as parties, the suit acquired an atypical structure, albeit one not prohibited by Fed. R. Civ. P. 20.*fn1 In a single action, B&E is suing FACC and Rubin for return of the seized funds, and Saber is suing FACC and Rubin for damages resulting from personal injury. B&E and Saber have no common claim, and the sole claim covered by the alleged settlement at issue on this appeal is Saber's claim.*fn2

B. The Settlement Dispute

The settlement dispute originated in negotiations between plaintiffs' and defendants' attorneys in February, 1984. Counsel for plaintiffs was Cornelius Van Galen. Counsel for defendants was James Franklin, who was retained by FACC's liability insurance carrier, Truck Insurance Exchange.*fn3 As FACC's agent, legal representative and co-defendant, Rubin apparently was entitled to coverage under FACC's policy on Saber's personal injury claim. Although the policy apparently did not cover the claim of wrongful seizure of funds.*fn4 Franklin undertook the defense of both Saber's and B&E's claims.

On February 17, 1979, the $54,366 seized in execution of FACC's judgment against Kruse was deposited with the district court. On February 28, 1984, attorneys Van Galen and Franklin began to discuss the possibility of dealing separately with the two claims. In mid-March, Franklin obtained authority from Truck Insurance Exchange to offer $35,000 in settlement of the personal injury claim. Franklin communicated this offer to Van Galen, who purported to accept on behalf of his clients. Van Galen then confirmed the terms of the settlement in a letter to Franklin dated March 21, 1984. The following day, in a pre-trial conference, the two attorneys reported their agreement to the district court.

Immediately after this conference, Franklin met with Rubin and reported what had occurred. Rubin told Franklin that neither Rubin nor FACC had consented, nor would they consent, to a settlement that addressed only the personal injury claim. Franklin notified Van Galen that Rubin and FACC had not consented to the settlement. Franklin explained that he viewed himself as having a conflict of interest between his obligations to the insurance company and his obligations to FACC and Rubin, and announced that he could no longer represent them in this matter. On March 23, 1984, Franklin telephoned the district judge's chambers to set up a meeting to discuss the problem. On the same day, Van Galen filed the motion to enforce the settlement agreement.*fn5

Rubin and FACC opposed the plaintiffs' motion on two grounds. They claimed, first, that Franklin did not have the authority to enter into a partial settlement since they had not consented. Second, they claimed that the attorneys had not reached an agreement on all of the material terms. The district court formulated the first issue as whether, under Pennsylvania law, Franklin's actions as a lawyer retained by an insurance company were binding on his clients, FACC and Rubin. The district court reasoned that "if, pursuant to an agreement between defendants and [Truck Insurance Exchange], [Truck Insurance Exchange] was granted authority to represent defendants in any settlement negotiations and to enter into a settlement of the personal injury aspect of the case on their behalf, then defendants would be bound by the acts of [their] agent, [Truck Insurance Exchange]." Saber v. FinanceAmerica Credit Corp., Civil No. 81-2873, mem. at 6 (E.D. Pa. Jan. 31, 1986). For this rationale, the district court relied on Limmer v. Country Belle Coop. Farmers, 61 Pa. D. & C. 2d 109 (1972), which held that an insurer was bound by the acts of its employee where the employee, a claims agent, acted improperly in giving the insurer's attorney express authority to settle the case for a certain amount without first receiving authorization from the insurer's home office. The district ...

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